The spreadsheet information describes the daily cost structure faced by two small tour companies near Lake Havasu:1) Desert Floats and 2) Rocks & Waters.The two companies compete with each other in a market with dozens of other competitors in a highly competitive market.The sheet shows the marginal cost, total fixed cost, total variable cost, average variable cost, average fixed cost, and average total cost for each motel for each day.All relevant economic costs are captured by this cost information.The explanations for your answers are worth more than the numerical answer.

a. Today, the market price for a tour is $231.How many tours will Desert Floats and Rocks & Waters each choose to offer that day if they wish to maximize their profits?Explain your logic for making these choices.

b. Both Desert Floats and Rocks & Waters have committed to paying their fixed costs for the day.A pandemic reduces tourism, and the demand for tours falls, causing the market price to fall to $167.How much output will each profit-maximizing company produce in this situation?Explain your answer.

c. In the long run it turns out that there are enough tour companies like Desert Floats to more than supply the market for tours.Similarly, there are enough companies like the Rocks & Waters to more than supply the market for tours.Both companies are still competing in the same market and they cannot change their cost structures.In long run equilibrium, what market price would we expect to see and how many tours per day would we expect each type of profit-maximizing company to offer?Explain your answer.

Data:

Cost Structure for Desert Floats Quantity MC TFC TVC AVC AFC ATC 0.00 450.00 1.00 65.00 450.00 65 65.00 450.00 515.00 2.00 125.00 450.00 190 95.00 225.00 320.00 3.00 115.00 450.00 305 101.67 150.00 251.67 4.00 120.00 450.00 425 106.25 112.50 218.75 5.00 125.00 450.00 550 110.00 90.00 200.00 6.00 140.00 450.00 690 115.00 75.00 190.00 7.00 160.00 450.00 850 121.43 64.29 185.71 8.00 180.00 450.00 1030 128.75 56.25 185.00 9.00 190.00 450.00 1220 135.56 50.00 185.56 10.00 200.00 450.00 1420 142.00 45.00 187.00 11.00 215.00 450.00 1635 148.64 40.91 189.55 12.00 235.00 450.00 1870 155.83 37.50 193.33 13.00 250.00 450.00 2120 163.08 34.62 197.69 14.00 275.00 450.00 2395 171.07 32.14 203.21 15.00 285.00 450.00 2680 178.67 30.00 208.67 16.00 300.00 450.00 2980 186.25 28.13 214.38 17.00 320.00 450.00 3300 194.12 26.47 220.59 Cost Structure for Rocks & Waters Quantity MC TFC TVC AVC AFC ATC 0 250.00 1.00 195.00 250.00 190 190.00 250.00 440.00 2.00 160.00 250.00 350 175.00 125.00 300.00 3.00 165.00 250.00 515 171.67 83.33 255.00 4.00 165.00 250.00 680 170.00 62.50 232.50 5.00 180.00 250.00 860 172.00 50.00 222.00 6.00 190.00 250.00 1050 175.00 41.67 216.67 7.00 200.00 250.00 1250 178.57 35.71 214.29 8.00 210.00 250.00 1460 182.50 31.25 213.75 9.00 220.00 250.00 1680 186.67 27.78 214.44 10.00 230.00 250.00 1910 191.00 25.00 216.00 11.00 240.00 250.00 2150 195.45 22.73 218.18 12.00 250.00 250.00 2400 200.00 20.83 220.83 13.00 260.00 250.00 2660 204.62 19.23 223.85 14.00 270.00 250.00 2930 209.29 17.86 227.14 15.00 280.00 250.00 3210 214.00 16.67 230.67 16.00 290.00 250.00 3500 218.75 15.63 234.38